What is the meaning / definition of Royalty Fee?

The term royalty fee refers to the monthly re-occurring fee a pays to the franchisor. The fee is generally a in the agreed upon percentage of the profits. Typically this ranges from between five and nine percent. This fee is generally oriented towards allowing the franchise healthy enough profit, after all expenses, thereby allowing the business to succeed both initially and ongoing.

Additionally to the re-occurring royalty fee, franchisees also pay an initial payment or initial fee. This fee varies greatly from franchise to franchise – but is generally agreed upon in the franchise agreement.

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